In 2018 the price-earnings ratio (PER) for brand-new apartments in greater Tokyo was 24.96, down from a record high of 28.66 seen in 2016 but up slightly from 24.49 seen in 2017. Almost 80% of the districts around train stations had PERs of over 22, while just 2.5% had PERs of under 18. A high PER means a low rental yield.
The average price of a brand-new 70 sqm (753 sq.ft) apartment across greater Tokyo was 73,440,000 Yen in 2018, up 9.9% from 2017 and up 22.4% from 2016. The average rent of a similarly sized new apartment was 241,631 Yen/month, up 7.4% from 2017 and up 37.6% from 2016.
Shibuya provides lowest rental return
The Shibuya Station area had the highest PER in greater Tokyo with a ratio of 41.21. The average price of a new 70 sqm apartment was 175,930,000 Yen, while the average rent was 355,738 Yen/month. This results in a gross rental yield of around 2.4%.
In second spot was Motomachi-Chukagai Station in Yokohama with a PER of 40.66, and an approximate gross rental yield of 2.5%. A new 70 sqm apartment had an average price of 120,420,000 Yen.
Gaienmae Station, located between Omotesando and the new Olympic Stadium, had a ratio of 37.52, and an average gross yield of 2.7%. This station was the most expensive across greater Tokyo for a new 70 sqm apartment, with an average price of 186,190,000 Yen.
Aoyama Itchome Station’s PER drops by half
Aoyama Itchome Station recorded a PER of 45.26 in 2017, putting it in top spot. In 2017, a recently completed luxury high-rise (Park Court Aoyama The Tower) propelled the average new apartment price to 209,260,000 Yen. This area has very few sites available for residential developments, resulting in only some smaller, low-rise apartments hitting the market in 2018. The average price last year was 174,040,000 Yen, while the PER was 22.71.
About the price-earnings ratio
The PER indicates how many years of rent it would require to cover the purchase price of a new apartment in the same area. A ratio of 20 would mean that the purchase price of a new apartment is equal to approximately 20 years worth of rent. The data does not include second-hand or existing properties.
Source: Tokyo Kantei, May 8, 2019.
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